Why so many Seattle Startups overpay for legal

The “startup law” market has changed dramatically over the past 5 or so years. Historically, a handful of very large firms, often with 500-1000+ lawyers, were considered the only real option for an emerging tech company likely to need serious counsel. It’s quite strange, when you step back and think about it, that entrepreneurs building smaller, lean tech companies disrupting old behemoths were led to believe that the only way to get great lawyers was to use massive, traditional firms.

History: Big and expensive was necessary.

The truth is, if you go back in history, there is a very good reason why those large firms were the only viable option. Scaling startups need lots of different kinds of lawyers (specialists). “Startup lawyers” are really just a subset of corporate/securities lawyers, focused on early-stage tech companies. But scaling companies also need a large variety of other specialist lawyers: tax, commercial transactions, patents, trademarks, real estate, litigation. A decade or so ago, getting all of those lawyers to efficiently collaborate with one another was virtually impossible if they weren’t under the same firm.

And the overhead structure of that firm is massive: expensive offices, lavish summer intern programs, file rooms, secretaries, on-site IT, a law library, expensive on-premise software, etc. All of this overhead inflates the cost of a large firm far beyond what it takes to pay the specific lawyer you’re working with. So the realities of emerging tech law years ago required that serious startups hire a law firm that charged, say, $700+/hr, even if perhaps 25% of that is going to the lawyer.

A leaner platform and ecosystem.

What’s happened over the past few years is that the SaaS revolution that dramatically dropped the cost of starting and scaling a tech company has done the exact same thing for law firms. New software makes it much cheaper to (i) run a law firm, and (ii) get a set of smaller high-end law firms to collaborate with each other. The result has been that entrepreneurial lawyers within top firms have realized that they can use new technology and processes to cut their rates significantly, without cutting their compensation, and collaborate with other boutique firms to replicate “full service” tech law in a much leaner and more flexible way. And that’s where the story of our firm started.

Egan Nelson (E/N) has been built from the ground up by former “BigLaw” tech/vc partners who realized that much of the traditional startup law market has simply overshot the needs of most emerging tech companies. If you’re really the next billion-dollar unicorn, please by all means go pay someone $700/hr to gain access to all the infrastructure needed to do multi-billion dollar international mergers or IPOs. But for serious entrepreneurs with more down-to-earth aspirations, real alternatives now exist: specialized lawyers with top-tier credentials, and resources right-sized for exits up to the hundreds of millions, but not billions, all delivered at hundreds of dollars less per hour.

Very large law firms have their place, just as very large companies do. But our belief is that markets like Seattle, Austin, NYC, and other ecosystems outside of Silicon Valley produce a lot of great, serious tech companies whose needs are very different from what the traditional SV-based firms deliver. It’s time the legal market answered that demand.